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Britain’s FSA steps harder on the feet of banks in an attempt to get them to release customer money following MF Global’s demise. Eris Exchange reaches an agreement to distribute its SwapBook data via CME Group’s Market Data Platform. Despite calls to just throw away the Volcker Rule and start over, or not at all, regulators working on the issue insist that in the end, they’ll have a viable solution using what they’ve already got so far. In today’s top box, JLN’s Nicole Rohr supplies a Five Minutes interview with Alice Botis of Fidessa; and Hernan Arellano and Felipe Gazitúa Undurraga of Chilean broker IM Trust.

Observations – Statistics – Commentary

Five Minutes With IM Trust And Fidessa
Web content editor Nicole V. Rohr talked to Alice Botis, Fidessa’s head of business development in Latin America; Hernan Arellano, partner and head of equities at Chilean broker IM Trust; and Felipe Gazitúa Undurraga, sales trader at IM Trust, about the recent partnership struck between the two companies in Chile. All three commented on the timeline for derivatives regulation, electronic trading and algorithms in the Andean region.

Q: What motivated the partnership between IM Trust and Fidessa?

Hernan: In Chile there are only [a few] providers already connected with the local stock exchange. One of them is Fidessa. We have been in the last year analyzing how we can grow and provide the best services in Chile to our clients, which have been growing mostly in foreign clients.

Most of our clients, which are brokers and asset managers, were asking us about connectivity, and ways of having direct market access (DMA) and executing algorithmic (algo) trading. So, we analyzed the case in Brazil and what happened [there], and essentially what we think is going to happen in Chile in the next five years. That is why we decided to make the first move, being the first broker in Chile offering this service.

Alice: I think what is very important is IM Trust’s growth plan over the next two years. They are very well established in Chile, [and] they are moving into Peru and Columbia.

Hernan: Our focus in Chile is on institutional clients and foreign clients. We have three divisions in Chile: a brokerage house, which has been recognized as No. 1 in fixed income in the last 10 years; equities, which has been growing in the last two years, and we have a corporate finance division; and asset management. In asset management, we are now managing $2 billion in the global market, so our focus is large clients and not many people. So, we are 160 people, just working in two floors in Santiago.

The idea is to replicate the same model in Peru. We have the research, we have the technology now, we have the knowledge, and since our focus is on institutional clients, we don’t need to hire too many people. We need to just focus on pension funds, mutual funds, and insurance funds. The companies and the foreign clients we already have in Chile are the same clients we’ll have in Peru. I just need to provide them with the same technology. We already have a very, very strong research department in Chile. So for me, starting to cover Peru and Colombia is pretty easy since I already have a research department with specialists in the industry.

Definitely, the market will grow. That’s going to happen here for sure, but the other thing that is important is that the local stock exchange in Chile provides people with the technology to trade. So, all of the brokers have the same system. In the end, the local market considers most of the brokers as commodities, you know. That’s why we wanted to have a different system and provide algo [trading] and everything the other brokers cannot provide. And to not be considered a commodity anymore.

No silver bullet to avert another MF Global – regulator
By Ann Saphir – Reuters
(Reuters) – Increased surveillance cannot guarantee customers will never again lose money in a broker insolvency, though the collapse of MF Global Holdings may lead futures exchanges to conduct more spot checks, a top U.S. regulator said on Thursday.http://jlne.ws/y0nwJB

**** There are only 2 things guaranteed in life and you know what they are.

STAC Coverage: Options Industry Looks to Long-Onlys for Future
Peter Chapman – Traders Magazine
Options industry officials are looking to traditional money managers for growth. According to one veteran options executive, growth in the use of options by retail investors is flagging, so the industry is looking upstream for order flow.http://jlne.ws/AsiHg0

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CME Group and Mysteel to Cooperate on Developing OTC Ferrous Risk Management Products for China
Press Release
SHANGHAI and LONDON, Jan. 19, 2012 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, and Mysteel, China’s leading provider of ferrous price and indexing services, today announced they have signed an agreement to develop risk management products for the ferrous industry based on Mysteel’s market-leading price data services. The products will be listed by NYMEX and cleared by CME Clearing.http://jlne.ws/cjpXe7

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The World Federation of Exchanges Publishes 2011 Market Highlights
Press Release
Paris (January 19, 2012) – Equity volumes in 2011 remained stable despite a fall in market capitalization, while derivatives, bonds, ETFs, and securitized derivatives continued to grow strongly, according to figures released today by the World Federation of Exchanges (WFE).http://jlne.ws/xiBRTE

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EU faces struggle to bridge divide with Britain
By John O’Donnell and Huw Jones – Reuters
BRUSSELS/LONDON, Jan 20 (Reuters) – Michel Barnier, the official in charge of regulating finance in the European Union, meets George Osborne on Monday in what are likely to be tough talks over rules the British finance minister believes will hurt the City of London.http://jlne.ws/zXek4L

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Registration Open For CME Group 2012 Commodities Trading Challenge
MartinKronicle
The CME Group is holding its annual Commodities Trading Challenge and it looks pretty awesome. These didn’t exist when I was cutting my teeth. Teams can register now and the Practice Round starts on February 13.http://jlne.ws/AutzJR

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DealBook: New Normal on Wall Street: Smaller and Restrained
PETER EAVIS and SUSANNE CRAIG – New York Times
With firms like Goldman Sachs and Morgan Stanley reporting weak results, Wall Street’s moneymakers are doubting they will ever get back to their high-rolling ways.http://jlne.ws/yfVRSy

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Can we trust industry-funded research on the Volcker rule?
Suzy Khimm – Washington Post
The House held a big hearing on the Volcker Rule yesterday – the regulation that’s meant to curb speculative, proprietary trading by financial firms for their own benefit, rather than their clients. One of the biggest concerns about the regulation is that it will reduce market liquidity and increase interest rates.http://jlne.ws/yAiAf3

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Downgrade the rating agencies
By Philip Stephens – Financial Times
I keep hearing people say don’t blame the rating agencies. My first reaction is why not? After due and sober reflection my considered response is why the hell not?http://jlne.ws/zZWgD2

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The newspaper that said ‘up yours’ to the Internet
By Brett Arends, MarketWatch
BOSTON (MarketWatch) — You gotta be online. In the exciting new digital world, journalism has to appear on the Web for free. You gotta blog. You gotta tweet. You gotta update your Facebook status. All the bloggers are doing it. All your competitors are doing it. You gotta keep up! Shorter! Faster! Now! So says conventional wisdom. Is it true? Listen to a counter-revolutionary.http://jlne.ws/zxYKnI

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JLN Interest Rates Newsletter

EU’s bailout fund capacity can be adjusted by governors-draft
Reuters
The combined capacity of the euro zone’s permanent and temporary bailout funds will remain at 500 billion euros for now, but will be reviewed in March and may be raised by the permanent fund’s board of governors once it is operational, according to a draft treaty obtained by Reuters on Thursday.http://jlne.ws/xWcP7Q

ECB’s Draghi in Confident Mood
Reuters
European Central Bank President Mario Draghi said Thursday he is “confident” that “the overall situation for the euro will look much better in 2012,” as many euro-zone states address their fiscal and structural deficits.http://jlne.ws/y4mJZQ

Eastern Europe May Need Funding Deal to Avert Credit Drought
BusinessWeek
Eastern Europe may require funds from the International Monetary Fund and other international lenders to pre-empt a banking crisis and a shortage of credit in the region’s economies as western banks pare assets.http://jlne.ws/yJ2Emu

Lead Stories

FSA Pressures Banks to Hand Over MF Global’s U.K. Client Money
By Kit Chellel – Bloomberg
Financial regulators have stepped in to help MF Global Holdings Ltd.’s (MF) U.K. administrators in negotiations for the return of more than 1 billion pounds ($1.5 billion) of client money held by banks.http://jlne.ws/w0qh0G

Volcker Rule Regulators Resist Lawmakers Calls to Scrap Proposal
BusinessWeek
U.S. regulators, responding to criticism of their Volcker rule proposal, told lawmakers they will refine plans for the ban on banks’ proprietary trading while resisting calls to scrap the measure and start over.http://jlne.ws/wDWPDN

Buyside traders demand more transparency
Tim Cave – Financial News
Buyside traders are demanding more transparency from European trading venues amid fears that new regulations could lead to a greater fragmentation of flow across platforms, highlighting the challenges faced by investors of a rapidy-changing market structure dynamic.http://jlne.ws/yNVocV

Greece Inches Toward a Deal With Its Bondholders
By LANDON THOMAS JR. – NY Times
LONDON — Greece and its private-sector creditors inched closer to a completed deal late Thursday over how much of a loss investors should take on just over 200 billion euros in Greek government bondshttp://jlne.ws/wouh1o

US debt reduction has a long way to go
By Gillian Tett – Financial Times
A couple of years ago, the words “American consumer” cast a shadow over global markets. No wonder. Back in the days of the credit bubble, American consumer borrowing helped to create a crazy debt binge.http://jlne.ws/yJACHM

The crisis raises legitimate questions about capitalism itself
Mohamed El-Erian – Financial Times
Coming from very different perspectives, the columns in the ‘Crisis in Capitalism’ series have each provided insights and identified steps that, in their opinion, could make things better. But, is there a way to reach a clear overall conclusion? I think the answer is yes, although the implications are disconcerting.http://jlne.ws/xfdxaT

Environmental Trading News

UK’s high-carbon investment risky, central bank told
Reuters
The Bank of England should look into how Britain’s exposure to high carbon emitting investments might harm the UK’s financial system and long-term economic growth prospects, a coalition of investors, academics and environmentalists said on Thursday.http://jlne.ws/z3nLkP

Phasing out fossil fuel subsidies ‘could provide half of global carbon target’
Guardian
Eliminating subsidies for coal, gas and oil could save as much as Germany’s annual greenhouse gas emissions each year by 2015, according to one of the world’s leading energy experts.http://jlne.ws/zqsI8I

For more environmental trading news, subscribe to the Environmental Markets version of the John Lothian Newsletter edited by Jim Kharouf.
Visit http://www.jlnenvironmental.com to subscribe.

Exchange & ECN News

Strate holds venture talks with Clearstream
By Philip Stafford – Financial Times
Strate, the South African securities depository, is in talks with Clearstream, the custody and settlement arm of Deutsche Börse, about outsourcing collateral management in its domestic market to the European group.http://jlne.ws/ysGt9Q

TMX Group Adds Shareholder Data and Targeting to Suite of Products for Issuers
Press Release
January 19, 2012 (TORONTO) – TMX Group Inc. today announced that it has acquired substantially all of the assets of ir2020, LLC, a US-based online shareholder data and targeting solution provider. The ir2020 product will continue to be distributed in the U.S. and will also be integrated into TMX Group’s suite of products available to Toronto Stock Exchange and TSX Venture Exchange issuers.http://jlne.ws/xKdDeJ

Fed Sold $7 Billion of AIG Mortgage Bonds to Credit Suisse
BusinessWeek
The Federal Reserve Bank of New York sold $7.01 billion in face value of mortgage bonds it assumed in the rescue of American International Group Inc. to Credit Suisse Group AG, the regional Fed bank said today.http://jlne.ws/xm5uP6

A Deutsche Bank Analyst Sounded The Alarm When Asked To Alter The Numbers On A Security To Make It Look Better
Business Insider
At a time when mortgage-backed securities were imploding and customers were fleeing the market, a junior analyst at Deutsche Bank AG protested when he was asked to alter the numbers in a spreadsheet to make a Deutsche security look less risky to ratings agencies, according to a person with knowledge of the matter.http://jlne.ws/yOiUIW

Market makers buck trend as profits surge
By Telis Demos in New York – Financial Times
Market-making firms bucked the trend of poor results for trading groups, though the results are unlikely to be sustainable. Knight Capital reported net income in the quarter was $40m, almost four times the $9m profit in the same quarter last year, principally on stronger revenues in its market-making unit, which matches stock trades primarily for retail brokerages.http://jlne.ws/ygfwkC

Knight Capital 4Q Net Soars On Higher Trading Income
By Jacob Bunge and Ben Fox Rubin Of DOW JONES NEWSWIRES
The top executive of Knight Capital Group Inc. (KCG) on Thursday sounded a cautious tone on the climate for trading, even as the company’s electronic market-making business handily surpassed Wall Street expectations for the fourth quarter.http://jlne.ws/x6VOQ2

M Stanley bucks trend with trading increase
By Tracy Alloway and Telis Demos in New York – Financial Times
Morgan Stanley has become the only big Wall Street bank to report an increase in trading revenue over the course of last year, bucking a trend of disappointing results from some of its peers.http://jlne.ws/zQC4XN

Morgan Stanley Slashed Euro Periphery Debt Exposure 40% This Month
Dow Jones Newswires
NEW YORK – Restructured derivatives trades that settled after the New Year helped Morgan Stanley (MS) slash its exposure to troubled European debt by 40% since the end of December.http://jlne.ws/wbioIG

Liquidnet Ranked #1 in the US and Europe for Operational Performance
Business Wire via Yahoo! Finance
Liquidnet, the global institutional trading network, announced today that it has been ranked #1 for operational performance in both the US and Europe as part of the 2011 McLagan Z/Yen Survey of Operational Performance of Brokers.http://jlne.ws/w4kD0R

Nomura Wholesale Banking Chief Position Vacant Anyone?
Wall Street Journal Blogs
The top seat at Nomura Holdings wholesale banking division is up for grabs, but any aspiring candidate must know it will be a challenging job.http://jlne.ws/yiCmFt

Bank of America Investment Bank Loses Again Under Montag
BusinessWeek
Bank of America Corp. reported a second consecutive loss at its investment bank as trading chief Thomas K. Montag grappled with the European sovereign-debt crisis.http://jlne.ws/AFhCAB

BofA Turns To Q4 Profit Amid Lower Loan Loss Provisions, Revenue Tops Street
RTT News
Financial services giant Bank of America Corp. Thursday reported a profit for the fourth quarter, benefiting from asset sales as well as lower provisions for bad loans, amid a challenging trading environment. Revenue for the quarter increased and came in ahead of Wall Street estimate. Net income applicable to common shareholders was $1.584 billion or $0.15 per share, compared to a loss of $1.565 …http://jlne.ws/xgfWIS

RBS denies clearing controversial bonus for chief
Reuters via Yahoo! News
LONDON (Reuters) – State-controlled Royal Bank of Scotland said reports it was due to pay chief executive Stephen Hester a bonus of more than 1 million pounds were “inaccurate and premature.”http://jlne.ws/wct6ZO

Morgan Stanley Said to Reduce Senior Banker Pay 20% to 30%
BusinessWeek
Morgan Stanley is reducing pay for senior investment bankers and traders by an average of 20 percent to 30 percent for 2011 as it seeks to curb mounting compensation costs, people with knowledge of the decision said.http://jlne.ws/wko0zK

Goldman Sachs Bonus Day Is a ‘Bloodbath,’ But Not Literally
New York Magazine
It’s all relative, of course. This year’s “Compensation Communication Day,” better known as Bonus Day, is coming to a close at Goldman Sachs, and while a complete picture is not public, and may not ever really be known , no one is really gloating either. The New York Times reports that the company set aside $12.2 billion last year for compensation and benefits. But on a personal level, albeit a …http://jlne.ws/w9ZNxb

Goldman Sachs Cuts Giving by 75 Percent
The Chronicle of Philanthropy
Goldman Sachs cut its charitable giving by more than three-quarters to $78-million last year while reducing compensation at a far lower rate, the Daily Mail and The Independent write.http://jlne.ws/ye4sa6

Citigroup Awards Pandit $3.7 Million in Stock as Profit Climbs
BusinessWeek
Citigroup Inc., the third-biggest U.S. bank by assets, awarded Chief Executive Officer Vikram Pandit about $3.7 million in stock as the firm reported a 6.4 percent increase in full-year profit.http://jlne.ws/wJHTk0

People on the Move: Hendrickson To Lead RIA Sales at HSBC Global
Financial Planning.com
Allianz Life Insurance of North America has appointed Cathy Malone as its chief administrative officer. In that role, she will handle enterprise operations, IT, compliance and other strategic initiatives. Previously, Malone had been senior vice president of Enterprise Operations at Allianz.http://jlne.ws/yqYQ7z

Yet Another Insider Trading Case Begins to Unfold
By PETER J. HENNING – NY Times
The government has moved yet again in its effort to crack down on insider trading, filing charges against seven defendants with ties to hedge funds who federal prosecutors say operated as a “circle of friends” by trading information.http://jlne.ws/Ag2wVM

S.E.C. Charges Banker with Misleading Investors
By LOUISE STORY and ANDREW MARTIN – NY Times
A Florida banker who is known for tangling with his critics, including with a prominent bank analyst during the financial crisis, was charged by federal regulators on Wednesday with misleading investors about his company’s real estate portfolio as the housing market turned south.http://jlne.ws/w2KDfY

Haldane seeks new bank accounts regime
By Norma Cohen and Brooke Masters – Financial Times
Banks should no longer be allowed to avoid taking losses on loans and bonds by saying they will hold them until repayment is due but should instead disclose their “fair value” to investors, a Bank of England director urged in a speech released on Thursday.http://jlne.ws/ydXqF0

Investments – Indexes – Managed Futures – Managed Funds

Global Macro Funds Totally Ate It Last Year
Business Insider
Last fall, Citi’s Steven Englander warned last October that hedge funds tracking economic trends and global markets like stocks, currencies and commodities were tanking.http://jlne.ws/ypne7m

Commodities Corner: Russia’s WTO entrance redraws global resource map
Market Watch
Russia’s acceptance into the World Trade Organization last month opened a door to free up global trade with a nation that is one of the world’s largest oil producers and if the impact on the last large economy to join the organization – China – offers any clue, Russia’s trade outlook has much improved.http://jlne.ws/wG2agc

Asia-Pacific News

Hong Kong Exchanges Shifts Strategy, Eyes Commodities
By Kate O’Keeffe – The Wall Street Journal Online
HONG KONG—The operator of Hong Kong’s stock exchange said it will look to commodities markets for growth as opportunities in equities slow, marking a radical strategy shift for the world leader in initial public offerings.http://jlne.ws/A0nuwh

SGX hires Glenn Seah as Head of Compliance
Press Release
Singapore Exchange (SGX) today said it is appointing Mr Glenn Seah as Senior Vice President and Head of Compliance effective 7 February 2012. Mr Seah will be responsible for driving SGX’s compliance with local and international regulations and best practices.http://jlne.ws/yqTCbj

SGX and Ong First to promote futures trading profession
Press Release
Singapore Exchange (SGX) and futures broker Ong First Tradition are launching a Professional Traders Development Programme to attract and train new futures traders.http://jlne.ws/xhVoDg

Frontier Markets

Miscellaneous News

‘Insider trading Is rampant and routine’
CNN Money
In order for Wall Street to thrive, and for our markets and economy to prosper, there needs to be a premise of fair dealing on a level playing field.http://jlne.ws/wMcQXu

We Can Get Your Financial Crisis Kitsch For You Wholesale
The Huffington Post
Over at the Washington City Paper , “Rich People Things” author Chris Lehmann goes questing after rumors that post-crash tchotchkes from the House of Lehman Brothers are on the auction block in Tysons Corner, Va.http://jlne.ws/zo6Ni6

Suzanna de Baca: Are You a Victim of Financial Infidelity?
The Huffington Post
I recently spoke with a friend who discovered that her husband had been cheating on her. But he wasn’t betraying her with another woman — he’d been sneaking around with their joint bank account.http://jlne.ws/x414Qa

Risk managers complain about Fed stress test workload
Mark Pengelly – Risk magazine
The Federal Reserve Board has made few friends among bank risk managers with its latest industry-wide stress test. While observers welcome the exercise – which will now be carried out on an annual basis, in line with a final Dodd-Frank Act rule issued by the Fed on November 22 – those at the coal-face complain about the test’s timing and the extra workload.http://jlne.ws/zSJoZQ

- Options Sponsors -

SunGard, which filed for an IPO on June 4, may instead be bought by another company. It is reportedly in talks to sell itself to Fidelity National Information Services, a service provider for banks. The deal could value SunGard at more than $8 billion.